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CBI welcomes Better Regulation Action Plan

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25th May 2005
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Gordon Brown has launched a Better Regulation Action Plan to "boost flexibility and enterprise".

The Chancellor announced details of a risk based approach to regulation and told business leaders: "The modern enterprise challenge is to enhance the flexibility needed for a successful economy and tackle the regulatory concerns we know all industrial economies face without sacrificing the standards a good society needs."

CBI deputy director-general John Cridland welcomed the plans, saying there was a pressing need for regulations to be cut-back and simplified.

"A risk-based approach to regulation is sound and would benefit well-run companies," he said.

"The key is getting the detail right and it is important to maintain the momentum behind the Government's better regulation drive kick-started by the Hampton and Arculus reports. But Government delivery of its deregulatory promises has been poor.

"Business supports the streamlining of regulators to achieve greater consistency but will judge its success on the quality of future dealings with the new 'improved' version. This must be about more than just rearranging the Whitehall deckchairs."

For the Institute of Directors, head of regulatory affairs James Walsh said: The Chancellor should be using an axe rather than a scalpel as he sets about his task of cutting up red tape. The battle against over-regulation must be about much more than crossing a few items off the statute books.

"We need fundamental culture change across the whole Government machine. Regulators and civil servants need to focus on what they can do to boost our enterprise culture. That means a completely new set of priorities, with regulation used only as a last resort."

Limited touch
In the new risk based approach "there is no inspection without justification, no form filling without justification, and no information requirements without justification," Brown said.

"Not just a light touch but a limited touch. Instead of routine regulation attempting to cover all, we adopt a risk based approach which targets only the necessary few."

A risk based approach is "a million miles away" from the old assumption that business, unregulated, will invariably act irresponsibly. The better view, he said, is that businesses want to act responsibly.

'New trust'
Brown continued: "Reputation with customers and investors is more important to behaviour than regulation, and transparency - backed up by the light touch - can be more effective than the heavy hand."

He claimed that "a new trust" between business and government is possible, founded on "the responsible company, the engaged employee, the educated consumer - and government concentrating its energies on dealing not with every trader but with the rogue trader, the bad trader who should not be allowed to undercut the good".

Legislation will be introduced next year to "reduce 29 regulators to just seven, embed the risk based approach at the heart of regulators' statutory duties, make it quicker and easier to remove unnecessary regulations and reform the penalty regime, doing more to help companies comply with the rules but creating tougher penalties for persistent offenders".

Immediate start
But regulators "must not wait for legislation to apply the principles of the risk based approach" Brown declared.

They will "immediately start" working together; developing detailed, deliverable merger plans; carrying out joint inspections to lessen the burden they impose; shortening and simplifying the forms they issue; and assessing any new regulation and minimising its burden.

The risk based approach has wide application from environmental health, to financial services and even taxation, Brown said.

The new Consumer Trading and Standards Agency will bring co-ordination at the local level.

The Government will look to apply the principle of risk based regulation on a wider basis to financial services legislation and the work of the Financial Services Agency.

Borwn added that "to motivate delivery and give transparency" the Government will set challenging, quantifiable targets - no later than the 2006 pre-budget report - to reduce the regulatory burden.

Departments will prepare measurable simplification plans to implement the Hampton reforms, he said.

Single tax account
Brown said the risk based approach will be applied to the work of HM Revenue and Customs "from frontiers right across to tax returns".

Instead of blanket requirements, "we favour less form filling and less need for inspection".

He added: "Take as an example one of business' greatest burdens - the administration of tax. We are cutting the tax return for half a million of the smallest businesses from sixteen pages to four. We will set targets to cut the burden of tax administration on businesses.

"David Varney, Chairman of the HMRC, is now consulting with you on a single tax account for small businesses: a single point of contact for all taxes, piloting single inspection, a risk based approach to visits, information provided only once, less time spent on form filling and flexible payment options that suit modern British business needs.

"Already 70,000 firms no longer have to provide forms that account for every VAT transaction but make just one calculation and pay one flat rate. Working with the Chambers of Commerce we will encourage take up among the 600,000 companies now eligible to benefit from this VAT simplification.

"And we remain ready to consider further reforms in this field."

Andrew Goodall
Editor, TaxZone

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Andrew Goodall
By Andrew Goodall
26th May 2005 09:17

SMEs carry greater burden
AccountingWEB member Stuart Jones, of Three Counties Accountancy, points out in a letter to the Financial Times today (26 May) that red tape, especially in the small and medium-sized companies sector, "is more than inspections and visits; it consists of an ever-increasing number of rules and regulations aimed at the business sector, but in terms of resources consuming a far higher percentage of available time in SMEs than in large businesses".

He adds: "It is clear that a considerable number of the 600,000 businesses eligible for the VAT flat rate scheme will be worse off in financial terms by opting for less paperwork. A government example of 'heads you lose, tails we win'."

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